Level 2 and Level 3 data: lower rates on business cards

Level 2 and Level 3 refer to how much information a transaction carries beyond the basics. Level 1 is a normal consumer sale: card, amount, date. Level 2 adds fields such as a tax amount and a customer reference. Level 3 adds line-item detail — item codes, descriptions, quantities, unit prices, freight. Business, corporate and purchasing cards can qualify for lower interchange when the extra data is present.

Whether this is worth a minute of your attention depends entirely on whether businesses buy from you on business cards.

Who does this actually help?

Suppliers selling to other businesses, and government contractors. A wholesaler invoicing a restaurant, a supplier shipping to a school district, a contractor billing a property manager — those are the transactions where purchasing cards appear and where the data requirements are realistic to meet.

A convenience store selling a sandwich to somebody who happens to be carrying a corporate card is not in this category. You cannot supply line-item detail at a register in a queue, and the saving on one sandwich would not repay the attempt.

What data does each level require?

Level 2 is modest: typically a sales tax amount and a customer code or purchase order reference, passed at authorization. Many point-of-sale systems and gateways can do this with a configuration change.

Level 3 is substantially more: a line for every item with a product code, description, quantity, unit of measure and unit price, plus shipping and duty fields. That is invoice data, which means it realistically comes from an invoicing or order system rather than from a counter terminal.

Why do the networks price it lower?

Because the data reduces risk and dispute cost. A transaction carrying full line detail is easier for a corporate cardholder's own accounts-payable process to reconcile, harder to dispute spuriously, and cheaper for everyone downstream to handle.

Interchange schedules price that. It is the same logic that prices a keyed transaction higher than a chip one: more information, less uncertainty, lower rate.

How would you know whether you are missing out?

Look at what share of your volume runs on business or corporate cards. Your processor can report this. If the answer is a rounding error, stop here and spend the time on something that matters more.

If it is a meaningful share and you invoice rather than ring sales at a counter, ask your provider two questions: does my gateway support Level 2 and Level 3, and what would my transactions have cost last month with the data attached. The second question has a real answer, computed from your own file.

Ask for the answer as a dollar figure for a specific month rather than as a rate difference. A percentage sounds meaningful on any volume; the dollar amount tells you whether the integration work is worth doing this year or at all.

What should make you sceptical?

Anyone selling optimization software to a counter-service retailer on the strength of this. The levers only exist for transactions that can carry invoice data, and a store ringing small consumer sales cannot produce it no matter what software it buys.

The honest version is narrow and specific: if you sell to businesses on purchasing cards, there is money here. If you do not, there is not, and the pitch is being made to the wrong shop. The published interchange schedules are where the categories themselves are defined.